Saturday, August 15, 2009

In a move that promises to strengthen its influence over how video is developed and disseminated online, Google Wednesday said it has agreed to acquire On2 Technologies, whose VP6 video compression technology is widely used and is embedded in Adobe's Flash player.

The search giant also Wednesday released a new beta of its Chrome browser, which adds support for HTML 5, a new tab page that allows customization, and a 30 percent improvement in performance, the company said in a blog posting.

The deal to acquire On2, valued at approximately $107 million pending regulatory and shareholder approval, is set to close by year's end. It promises to bolster both the new Chrome browser analysts said, but more pointedly its popular but unprofitable YouTube service. On2's compression technology will help Google improve the way video is rendered on the Web, the company said in a blog posting.

Google's YouTube still lacks a reliable video rendering engine, which has limited its commercial success, said Ovum analyst Tony Baer. "Getting a solid compression engine will help scalability," Baer said in an interview.

IDC analyst Al Hilwa said the move appears to be motivated by Google's desire to gain more control over the development of higher quality video on YouTube but it could also have implications of how video is developed and deployed in the Chrome browser and perhaps ultimately its forthcoming Chrome OS, announced last month. "I would expect once they complete the acquisition, they will start building this technology into the browser, and then they will start pushing for this to be part of the HTML 5 standard," Hilwa said in an interview.

The question remains as to whether Google will open source On2's proprietary technology. "I can see them embedding and possibly even promoting this technology to other browsers and other OSes and to try to create some soft of defacto/open source standard," Hilwa said. "They have to navigate the issue of proprietary IP and open source smartly because On2 has a lot of proprietary technology and Google is a fan of putting things strategically into open source. It all boils down to what Google says about what they are going to do with the intellectual property."

Google's acquisition of On2 also adds a new dimension to the battle over compatibility of video over the Web. The deal is probably not be welcome news to Microsoft and Apple, which both support the H.264 video compression standard, while On2 has eschewed that format, Hilwa said. For that matter, it remains to be seen what impact the deal will ultimately have on Google's relationship with Adobe (Sun Microsystems has also licensed On2's VP6 for JavaFX).

An Adobe spokesman said an email that the company expects to continue its collaboration with Google. "Adobe is a longtime partner of both Google and On2 Technologies and is excited at the opportunities to create a higher quality video experience across all devices," the spokesman said.

"In terms of the popularity and actual volume that's being looked at every day on the Web, Flash is by far the most popular kind of video, and that is in no small part to YouTube using Flash," Hilwa said. "Right now everyone is playing their chips. This is not fully played out."